CMR: Online Ad Spending Dips Further in 3Q

In news that will come as no surprise to the interactive advertising
industry, research group CMRi says spending on online ads in the first three
quarters of 2001 dipped, as compared to the same time period last year.

According to CMRi, the interactive division of CMR, online ad spending
for the first three quarters came in at an estimated $2.1 billion. The
company didn't make available figures for the same time period in 2000, but
it would difficult to make an apples-to-apples comparison anyway, since the
company has changed its methodology somewhat in the intervening months.
Using its admittedly flawed figures, the company said spending dropped 17.7
percent year over year.

Perhaps a more telling figure is the difference between the rate of
spending in the first two quarters, and the rate of spending in the third.
CMRi says Web ad spending for the first half of 2001 totaled $1.5 billion,
which would indicate a $750 million average quarterly spending rate. With
that in mind, the spending rate for the third quarter comes in at $600
million, showing a decline of $150 million.

Advertising revenues, however, generally drop in the third quarter, with
the fourth quarter increasing due to holiday-oriented spending.

"As many look to the holiday season to alleviate the slowdown in online
activity, we may see a bright spot in spending post-holiday, especially as
more and more traditional companies move their ad campaigns to the
Internet," said David Peeler, president and chief executive officer of CMR.

Due to differing methodologies, the numbers CMRi is citing are sharply
lower than the ones released recently by the Interactive Advertising Bureau
and PricewaterhouseCoopers. At the IAB annual meeting last week, the
organization said the first nine months of 2001 saw $5.5 billion in online
advertising expenditures. Still, the trend was the same, in that the IAB
said spending was down 8.4 percent from last year.

In its research, CMRi found that eBay led Internet ad
spending for the first three quarters, finally surpassing General Motors,
which has been the perennial leader since the research firm
began its measurements. EBay has spent $35.7 million online in 2001 so far;
General Motors was right behind it with $35.5 million; and the third biggest
spender was the troubled Providian Financial Group, which
spent $23.5 million.

Retailers were the biggest spenders in the first three quarters of 2001,
shelling out $432.6 million bucks; next came the media and advertising
sectors, spending $363.3 million; following those two was the financial
industry, spending $260.6 million.

The top recipient of these ad dollars, according to CMRi, was Yahoo!,
which garnered $284 million; next came AOL.com, with $252.6 million, and Excite, which brought in $118.2 million.
Despite the big numbers, CMRi said Yahoo!'s revenues had declined $8.6
percent from the year-ago time period, when it brought in $311.2 million.

The overall trend is similar, though apparently more severe, than that
experienced by the offline advertising world. In a study released earlier
this week, CMR said that traditional ad spending fell 7.8 percent in the
first nine months of 2001 compared to the year-ago period, from $74.7
billion to $68.8 billion. Of offline media, television was especially hard
hit, due partly to the loss of ad revenue during the week of the September
11 attacks, with network TV down 8 percent and spot TV down 17.9 percent.
Cable television, though, actually saw a 2.1 percent revenue increase in the
third quarter 2001 as compared to last year, and outdoor advertising also fa
red well, with a 2.6 percent jump.

Still, CMR's Peeler expressed hope for the online advertising industry,
as budget conscious companies try to get the most bang for their buck.

"In order to overcome some of the cuts in ad budgets that most (online)
advertisers felt this year, companies are carefully utilizing online
targeting capabilities to effectively market brands to appropriate end
users," said Peeler. "As companies take advantage of this tactic, the
advertising industry is hopeful of seeing a steady increase of dollars
budgeted for Internet ad campaigns in the New Year."

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